Understanding your Paycheck and W-4

Below is an overview of how to understand a sample paycheck and a video introduction to filling out a W-4

Sample Paycheck

Source: Consumer Financial Protection Bureau

Looking over your paycheck can be a difficult and confusing endeavor. Money is taken out of your paycheck for tax purposes and gross and net pay are different numbers. This section aims to help you understand your paycheck so you are better equipped to question paycheck issues if they arise. Each section has a corresponding number (1-9) and is explained below. 

1. Pay Period

Many employers will pay you once every two weeks. If you are unsure about your pay schedule, you should ask your employer. In addition, the pay date, located at the top right of the sample paycheck, is the date you should be paid for your pay period. ​

2. Gross Wages

Gross wages represent how much you would be paid if deductions were not taken out (numbers 4-7). If you are not on salary and work for an hourly wage, you will see your pay per hour below ‘rate’ and the hours you worked during the pay period under ‘hours’.

3. YTD Gross

YTD Gross or Year to Date Gross is the amount of money you have earned during the year before deductions.

4. Federal Taxes

Federal taxes are deducted for the federal income tax so that you are not sent a hefty tax bill when April comes around. You may be eligible for a tax return when taxes are due in April.

5. FICA Social Security Tax

FICA SS tax (5) is taken out to pay your portion of Social Security. Social Security is deducted to pay for benefits for disabled and retired individuals.

6. FICA MediCare Tax

The FICA Medicare taxes are deductions to pay for the cost of MediCare, which is a federal health insurance program for adults aged 65 or older and individuals with disabilities.

7. State Taxes

State Taxes are taken out of your paycheck to pay the state income tax. Like the federal income tax, this deduction lowers your tax bill in April.

8. Deductions

Deductions represent all the taxes taken out of your paycheck and will show the total amount. As you can see in the net pay, the gross wage of 200 minus the 44.67 in deductions equals your net pay of 155.33 (take home pay). 

9. Net Pay

Net Pay is the amount of money that you will take home (Gross wages minus deductions).

How to fill out w-4

This video, created by the Federal Reserve, provides a walk through of filling out a W-4 form. If you have further questions, please reach out to a CEO staff member or consult a certified financial professional.